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Comment by tekla | Hacker News Reader

Good stuff, let it burn. The system is working as intended. People who made very very risky dumb bets are getting punished heavily for it.

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I know this is (was) downvoted a lot, but I understand this sentiment. If you read the comments above, it's a "sky is falling" situation for many startups in the Silicon Valley sphere of influence. How is it that the silicon valley tech ecosystem could be in a position where one singular bank failure could wipe out so many startups? Pretty remarkable how fragile the ecosystem is if that's all it takes.

seems as if banks don't want VC startups as customers

Is this from personal experience? I can tell you a lot of East Coast, Southern US, non-Silicon Valley and non-US Startups have no problems finding banking partners outside of SVB. The adage that only SVB knows how to bank startups hasn't been true for decades.

Honestly, it hasn't been true ever.

> I know this is (was) downvoted a lot, but I understand this sentiment. If you read the comments above, it’s a “sky is falling” situation for many startups in the Silicon Valley sphere of influence. How is it that the silicon valley tech ecosystem could be in a position where one singular bank failure could wipe out so many startups?

From most accounts it seems to be a very tight ecosystem with a lot of close relationships between VCs, service providers, and serial founders. Very easy to see how it could develop high-impact dependencies that are very close to single points of failure.

Much of the Silicon Valley ecosystem are these sort of tight loops: VCs / law firms / banks / accounting firms / HR firms / marketing agencies / senior management / key hires / etc. It's a tight clique. If you're in with the right circles, you're in with all of it. For a community that prides itself on innovation and disruption, there's remarkably very little of it when it comes to operations. Much of it is herd mentality, from the investing decisions to even the structure of HR. C-level execs also float between these circle of companies, bringing the same decisions with them everywhere.

Sorry, are you saying that depositing money in a bank account is a risky dumb bet?

When the majority is uninsured, yep.

How is this good? This means companies will fail and employees won’t get paid through essentially no fault of their own?

Teaching companies lesson about diversifying their finances is probably worth few startups going down (...which they might anyway). VS robbing taxpayers for another private corporation mistake

Businesses with more than 250k in the account should have diversified. Employees are at no fault of course but so are tax payers.

YC companies that have been exposed so badly through this are probably non-essential.

My company is also exposed and we will suffer, because we were stupid but luckily not complete morons

welcome to a capitalistic economy in which the free market reigns supreme.

This is part of a healthy economic market according to market economic theory.

SVB didn’t make a risky bet- they did the opposite and locked deposits in a very conservative bond strategy.

No it wasn't conservative. It was very risky completely based on assuming almost 0% interest rates over 10 years and fully locked in. That's clearly a crazy position to take. Every small increase in interest rates has a outsized effect on these bonds.

It's not that crazy considering we saw 10 years of 0% interest rates... well for the past 10 years. If anything it was the status quo. Only in hindsight does it look crazy.

That the interest rates were at 0% for so long implies that the rates will have to be going up in the near future. They can't stay at 0 forever, and 10 years is a very long time.

The obviously risky bet is that the rates would stay 0.

That's just gambler's fallacy. If you said the same thing in 2018 you'd have just as much evidence, but you would have been wrong.

How would I have been wrong? They didn't stay at zero forever.

In 2018 some countries had started experimenting with negative interest rates, so 0 isn’t the lower bound. Secondly, you would have been wrong for the next ~3 years. That’s a long time to be on the wrong side of a bet. Long term nothing is guaranteed of course.

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